Risk Management Overlay Example - Recap 10/2/2009

Risk Management is what it is all about in trading the futures markets. Putting structure to random price action is what JS Services Price Map does. Below is a recap of Friday October 2nd action from Thursday's Blog post and the Price Map performance.

RECAP - October 2, 2009


INTEREST RATES

The world is ready for a little fireworks today as we kick off volatility month. Watch the Interest Rates today for confirmation of an event. The 30yr T-Bond basis Dec'09 has a major resistance inflection pivot at 123-23 and the Dec'09 10yr T-Note resistance pivot is at120-070. If the long end of the curve is going to stall out they each will show signs of strain here. A sustained breach of resistance in both contracts have the potential to launch and put the rest of the world on its head.

US 30YR T-BOND Z'09





* Notice how the 30yr reacted off the 123-23 resistance pivot defining the day for the MKT. This signal provided a clue that it was going to be business as usual for the rest of the world.

US 10YR T-NOTE Z'09





* The 10yr was unable to attain its major resistance and stalled out at a minor level but in confluence with the 30yr. Later in the session the 10yr action off the DIR [Directional level] provided a clue that the 30yr was vulnerable to further losses.





EQUITIES
In the Equities the Dec'09 SP500 can slip as low as 1011.50 without doing much damage to the MKTs underlying confidence. A held failure here and tings can get emotional with 994 and 977 targeted. A rise above the 1036.50 session Inflection Pivot will make yesterday's weakness look like a head fake and if the Interest Rates have rejected hard from their resistance it will be back to bidness as usual targeting 1063.

SP500 INDEX Z'09





* The 1011.50 level proved to be the key support inflection point for the Index. The negative reaction in the 30yr providing confidence that the MKT was due for a positive reaction off this level.






CURRENCY
The Dec'09 EUROFX is set for a big range day and remains in a corrective trade below the 14667 Inflection Pivot. A break under 14499 and yesterday's negative momentum has the potential to accelerate with 14415 and 14247 the lower targets. A rise above 14667 and the buyers will look to take back lost ground in a hurry, putting the recent highs at 14844 in jeopardy.



EUROFX Z'09






* Notice how the EUROFX provided a REVERSAL signal off the 14499 support pivot. The negative reaction in the 30yr providing confidence that no event was in play and a reaction up to the 14667 Inflection Pivot should be expected.



GOLD
Dec'09 GOLD is in a NEUTRAL CORRECTIVE posture with 1005.8 the session Inflection Pivot. Draw a line here. Below this price the yellow metal is vulnerable to a drop down to 985.8-983.7 with the potential to go a low as 970.8. 933.3 is the current lower extreme. A rise above 1005.8 and the buyers will try to flex. If the interest is going to fizzle it will against 1015.8. A violation here and we could be in for the big one to the upside with 1033.9 and 1065.2 the initial targets.


GOLD Z'09



* As expected GOLD made a play for the 985.8 support level, however the negative REVERSAL in the 30yr cut the move short signaling a re-test of the 1005.8 Inflection Pivot. MKTs like to gravitate to their key pivotal areas when they are indecisive on what to do next.

ENERGY

Nov'09 NAT GAS is flirting with disaster. Key off the 4.553 Inflection Pivot for an indication for he session tone. Below here yesterday's BEAR TREND ACCELERATION signal keeps the controls with a failure from 4.388 confirming the signal targeting 4.035 on any negative follow through. A rise above 4.553 delays the inevitable for a difficult trade up to 4.716. If the aggressive sellers are going to return they will enter here. If not a positive shift into neutral is the outlook with 5.030 the upper digestive extreme.

NAT GAS X'09

* The NAT GAS MKT tried to press it to the downside but could not hold under the 4.388 support, producing a reaction back up to the 4.553 Inflection Pivot. As a confirmation to the positive REVERSAL signal the contract rotated up to the top of its expected digestive range at 4.716.

Having a RISK MANAGEMENT OVERLAY provides structure. Understanding structure allows you to anticipate opportunity not react to it. This is the difference between marginal and great success. Get the edge.

JS

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